AIS FGT Electronics

B-ACIS221 Final Project JULY 2020 Submitted by: Alberto, Dexter H. Cullado, Jannielle T. Monserrat, Patricia An Emmanuel Villanueva, Rodine Juverille M. BSA21

COMPANY PROFILE FGT ELECTRONICS CENTER AND RADIO COMMUNICATION SUPPLY is an authorized Radio Dealer located in Block 3 Lot 8 Almond St. Summerwind Village Phase 1, Brgy. Salitran III, City of Dasmariñas, Cavite. It is a sole proprietorship owned by Fernando G. Tolentino Jr. FGT's trained technicians are knowledgeable in all aspects of radio communication systems for a variety of industries. They understand the significance of radio communications systems, especially public safety radio equipment. As an Authorized Dealer, they supply only the highest quality radio communications systems to ensure clients the most efficient and cost-effective communications solutions. The products and services offered by FGT Electronics Center and Radio Communication Supply encompass a wide range. It includes undertaking the study, evaluation, and preparation of engineering/technical plans, bill of materials for diverse systems such as HS/SSB voice and data Network, VHF-UHF FM/AM two-way radio system from simple system to complex digital trunked radio systems, Paging System, CCTV, Building Security Management System, Weather Instrument, GEMS-Global Environmental Modeling Systems, Tower and others. FGT Electronics Center and Radio Communication Supply also have the capability to supply, deliver, install, test, In addition, and commission the system and equipment to conform to the requirement, FGT Electronics Center and Radio Communication Supply believes in the importance and value of a dependable pre-sales and reliable after service and support which will not only provide satisfaction to the users but will further enhance the prestige and reputation of the company that will eventually result in the increase in the potential volume of sales. Apart from this, FGT Electronics Center and Radio Communication Supply provides Security Solutions such as CCTV Surveillance Security System products, Access Control Systems, Burglar Alarm, Fire Alarm System, Wireless networks, Audio Automation, Communication, Metal Detector, Hotel Locks, Barrier Parking Lot and power product. Its mission is to expand and continually improve its services to meet customers' needs. COMPANY PROFILE 02

MISSION & VISION Mission To secure the life of people and to be one of the biggest distributors of Electronics Solutions in the country; To help Filipinos improve their living by bringing new technologies to the Philippines at an affordable price. Vision FGT Electronics Center and Radio Communication Supply continues to strive hard to become the country’s No. 1 and leading distributor in the wireless communications and security & surveillance industry, and truly, it keeps its vision of providing and making new technologies convenient and affordable to every Filipino. COMPANY HISTORY FGT Electronics Center & Radio Communication Supply is a company established by Fernando G. Tolentino in 1966. The business started with only three employees and focuses more on providing radio telecommunication equipment for security agencies. Today, the company has expanded and integrated surveillance products and IT equipment into the products offered. Moreover, they also offer installation services for the products that were acquired from the entity. As the business expanded, its human resources also increased and now has a total of 19 employees. COMPANY PROFILE 03

PRODUCTS AND SERVICES OFFERED A. Land Mobile Communication Systems VHF / UHF mobile communication unit VHF / UHF portable communication unit Voice and data terminals Voice and data communication systems VHF / UHF / HF base stations Conventional Repeater systems Leasing of communications equipment and systems Trucking systems / trucked networks / NexEdge systems and controllers Dispatch consoles / SCADA systems / alarm controllers Commercial trucked radio services Communication towers / masts (portable and fixed) B. CCTV Surveillance Solutions Home Surveillance Solutions Bank Surveillance Solutions Building Surveillance Solutions Factory Surveillance Solutions Vehicle Monitoring Solutions City Road Monitoring Solutions COMPANY PROFILE 04

PRODUCTS AND SERVICES OFFERED C. Access Controller System Solutions Prison Access Control Management System Solutions Intelligent Residential District Access Control Card System Solutions Building Access Control System Solutions Factory Access Control System Solutions Office Access Control System Solutions D. IT Equipment/Peripherals Branded Desktop/Laptop Computers Branded Network Servers Generic Desktop Computers E. Installation and Repair Services COMPANY PROFILE 05

ORGANIZATIONAL CHART FGT Electronics Center & Radio Communication Supply is a sole proprietorship owned by Mr. Fernando G. Tolentino Jr. The general manager, Mr. Gian Carlo B. Tolentino, is also in charge of overseeing its three different functions in their day-to-day operations. Employees are divided into three departments: Sales, Administration, and Technical. The Sales Department is handled by Ms. Clarence I. Genova, who is in charge of tasks such as canvassing and purchasing concerning FGT’s projects. The Technical Department, on the other hand, is responsible for the scheduling, delivery, and logistics. This department is headed by the project manager, Edgardo C. Boquiren, and is further divided under the supervisor and network engineer. Thus, the supervisor looks after two teams, each headed by senior technicians. The Administration Department, consisting of an accountant and office secretary, is tasked with the payroll function, petty cash, payments, contributions, and accounting records. The company also has a service driver assigned to accompany the personnel in meetings and depositing cheques. COMPANY PROFILE 06

FGT ELECTRONICS' CURRENT REVENUE SYSTEM Context Diagram FGT Electronics’ revenue system consists of two external entities: the local government unit or LGU and the bank. The system begins with the inflow of documents, namely the notice of award, contract, notice to proceed, and purchase request from the LGU. The system will then process these documents and schedule to deliver the goods and services required by the LGU. Once the project is delivered completely, the system will send proof of completion, allowing them to bill the LGU using a sales invoice. The LGU will then send a cheque to settle the invoiced amount together with a disbursement voucher. Upon receiving the payment, the system will issue a collection receipt to the LGU, validating that the payment has been received. After a week of collecting payments in the form of cheques, FGT Electronics’ personnel will deposit these with their prepared deposit slip in the Bank, and in exchange, they will be given a validated deposit slip which will be recorded and filed in their system. CURRENT REVENUE SYSTEM 07

Level 0 Diagram FGT Electronics' Revenue System begins with the external entity, LGU, whose inputs initiate the system consisting of eight processes: Receive Project Confirmation, Prepare Delivery Schedule, Check Stock Availability, Deliver Scheduled Service, Process Client Payment, Update Accounting Records, Deposit Collected Checks, and Record Amount Deposited. It is important to note that FGT acquires projects through PHILGEPS, an online portal where the proposed projects by local government units or LGUs, national, and other government offices are posted. A bidding process is conducted and if FGT wins the bid, the respective office provides them with the contract and other bidding documents, initiating the revenue system. CURRENT REVENUE SYSTEM 08

Process 1: Receive Project Confirmation FGT’s revenue system begins with the Sales Department’s receipt of four bidding documents: the contract, notice of award, notice to proceed, and purchase request. Serving as proof that they won the bid, the project is then confirmed, and the bidding documents are filed in a folder. Finally, data, such as the specific LGU, project title, RFQ price, budget, and contact person, is extracted from the documents and flows into the succeeding process. CURRENT REVENUE SYSTEM 09

Process 2: Prepare Delivery Schedule The data from the bidding documents is used to prepare the delivery schedule. The information regarding the LGU, project tile, RFQ price, budget, and contact person consolidate to form the project details and are used to update the master file. The master file is an excel file kept by the Sales Department that provides a summary of all of FGT's projects. The new project is inputted into the file and a schedule of deliveries is created by the account manager. Apart from the master file, the project details flow into the following process as well. Process 3: Check Stock Availability The Sales Department checks on the availability of materials required for the project. A stock request is sent to the warehouse and in case of insufficient stock, the back-order file is updated to reflect the request. If stock is sufficient, the job order is created and sent to the Technical Department. CURRENT REVENUE SYSTEM 10

Process 4: Deliver Scheduled Service Process 4.1: Check Personnel Availability The project manager from the Technical Department receives the job order and checks on the availability of personnel. A personnel request is sent to the personnel log to determine which technicians are available for the schedule. A list of available technicians is created and sent to the respective project manager who handles the succeeding process. Process 4.2: Assign Service Personnel The list of available personnel is used to assign technicians to the project who will deliver the goods or services. CURRENT REVENUE SYSTEM 11

Process 4.3: Deliver Project Requirements The assigned personnel then deliver the goods and services. Depending on the scale of the project, it may take anywhere from one to two months. The duration of the project depends on what was agreed upon the contract and the notice to proceed. Process 4.4: Update Project Progress The delivery data is used to update the project’s progress and the date of completion of delivery is inputted into the project summary of the master file. Process 4.5: Forward Delivery Documentation Once the delivery is deemed complete, the Technical Department produces delivery documentation, such as the delivery receipt and proof of delivery pictures. LGUs also require extra documentation and so, proof of delivery pictures are gathered. Together, these are forwarded to the LGU. Two more copies of the delivery receipt are produced, one for filing in the closed project file to finally close the completed project and the other copy flows into the billing process. CURRENT REVENUE SYSTEM 12

Process 5: Process Client Payment Process 5.1: Bill Project Client The copy of the delivery receipt is used as confirmation that the delivery is completed and has been received by the client. It flows from the Technical Department to the Sales Department, which then bills the client by creating the sales invoice. The sales manager writes the corresponding details regarding the goods and services delivered and the amount due. A sales invoice booklet is used, producing 3 copies: the original, a yellow carbonless copy, and a pink carbonless copy. The original is sent to the LGU, a copy is kept in the booklet for filing, and the 3third is sent to the Admin Department, where the accountant is positioned to update the accounting records. Process 5.2: Collect Client Payment A copy of the sales invoice from the Sales Department is then used to collect the payment from the LGU. It may take anywhere from two weeks to a month upon completing the delivery before payment is collected. The LGU sends a cheque with a disbursement voucher to be signed by the receiver, an authorized representative from the Sales Department, to pay the invoiced amount specified in the sales invoice. CURRENT REVENUE SYSTEM 13

Process 6: Update Accounting Records Process 6.1: Record Accounts Receivable The sales invoice will be used to establish the accounts receivable wherein the amount due will be recorded on the General Journal. Process 6.2: Post Amount Receivable At the end of the month, the Accounts Receivable summary on the general journal is totaled and used to post to the general ledger. CURRENT REVENUE SYSTEM 14

Process 7: Deposit Collected Checks The cheques collected are held for one week before they are deposited. On the day of deposit, the cheques collected and deposit slip will be taken by the available personnel and the company driver. The sales department, administrative department, and office secretary are the people who may perform the act of depositing cheques in the bank. Because there is no designated depositor, the owner verbally assigns any available employee with the task of depositing the cheques. Process 8: Record Amount Deposited After depositing the checks in the bank, the validated deposit slip is given to the accountant, who uses it to update the general journal 3 CURRENT REVENUE SYSTEM 15

CRITIQUE OF THE CURRENT REVENUE SYSTEM STRENGTHS 1. Maintaining a Manual and Automated Transaction Records FGT also stores company data using an excel file and specialized software. The company also maintains a master file wherein their projects for the year are indicated along with the quotation price, date of completion, and collection. Although the company keeps digital accounting records and files, they also maintain physical source documents and books of accounts as a backup. This reduces the risk of inadequate accounting records in case of the destruction of computer files. 2. Back-Up of Computer Files With files kept on the PC, there is a threat of data loss due to possible disk failures or file corruption. FGT is able to reduce this threat by syncing its computer files to Google Drive. Apart from this, having back-ups can also be helpful, especially when going out to business meetings, wherein they can use mobile phones to present and access documents and reports at ease. 3. Safeguarding of Assets FGT has CCTV cameras installed in front and inside of the warehouse. There are also cameras installed inside and outside of the main office. The owner has access to this equipment. Even if the owner is not present in the office, he would still oversee the business’s day-to-day operations. They also have a safe place inside the owner’s office, which they use to keep all their collected cheques before depositing them in the bank. This safe is watched by the office secretary in cases when the owner is not around. These practices are ideal to have a strong control measure against theft. CURRENT REVENUE SYSTEM 16

WEAKNESSES 1. Inventory Management There is no proper inventory management system in place, leading to inefficiencies whenever the Sales Department cheques and requests stock for a project. The stocks in the warehouse are kept track of manually by physical count. Apart from being a time-consuming process that decreases their efficiency, there is the risk of human errors in such manual processes. Furthermore, with no inventory management in place, the stocks are not updated automatically and real-time inventory data cannot be provided. 2. Segregation of Duties Due to the limited number of employees in the company, it is inevitable for them to assign employees to handle multiple tasks. This applies specifically to the account manager from the Sales Department who is in charge of the project, starting from the receipt of the bidding documents to the collection from the LGU. Hence, the employee is also tasked to issue the sales invoice as well as collect the payment. Moreover, the sales department/account manager has access to the accounting records of the entity. 3. Inaccurate Accounting Records The accounting records are not updated correctly. After the sales invoice copies have been generated and the cheque is received by Sales, these are passed down to the accountant from the Admin Department. Only then can accounts receivable be recorded in the general journal when the commonly accepted practice is to establish a receivable when the customer is billed. Hence, the accounts receivable should have been recorded when the Sales Department created the sales invoice. Afterward, the receivable is only deemed collected when the cheque is deposited, and the validated deposit slip has reached the accountant. Apart from this, FGT Electronics only maintains stock records for warehouse purposes and has no formal accounting records for controlling inventory. 3 CRITIQUE OF THE CURRENT REVENUE SYSTEM 17

4. Lack of Independent Verification Because the company only has one accountant, she is the only person who assesses the records made by herself. Therefore, it induces a lack of independent verification in evaluating the reliability and correctness of the journal entries. This leads to the threat of undetected errors and, ultimately, inaccurate accounting records. 5. Reconciliation The entity only applies reconciliation on the purchases and sales invoices, which the Sales Department handles. Moreover, the accountant does not perform any reconciliation on the company’s bank statement and the collection receipts that the company has obtained from accomplishing a project. Omitting this process can potentially lead to an inaccurate presentation of financial documents. 6. Inefficiency of the Scheduling Process The sales department is the one who is tasked to check the stock availability and initiate the assigning employees and scheduling of delivery service. The project details first go through the Sales department that processes the schedule and checking of stock before reaching the Technical department in charge of logistics and delivery. This can cause delays and incoordination in the delivery process. Since the schedule is created before informing the Technical department, it allows instances where a limited number of technicians and personnel are available for the delivery. Unfortunately, this setup can lead to bottlenecks and inefficiency of the company's operations. 7. No Designated Messenger to Deposit Checks There is no designated employee who is tasked with the depositing of checks to the bank. The owner is not physically present in the company’s day-to-day operations, so the designation of 3the person who will deposit the collections for the week is done through the means of online communication. Moreover, there are also some instances wherein depositing collections depends on the availability of the personnel. For example, if the office secretary is not available during the time of deposit, the account manager can fill in her duties. CRITIQUE OF THE CURRENT REVENUE SYSTEM 18

RECOMMENDED REVENUE SYSTEM FOR FGT ELECTRONICS Context Diagram FGT Electronics’ revenue system consists of two external entities: the local government unit or LGU and the bank. The system begins with the inflow of documents, namely the notice of award, contract, notice to proceed, and purchase request from the LGU. The system will then process these documents and schedule to deliver the goods and services required by the LGU. Once the project is delivered completely, the system will send proof of completion, allowing them to bill the LGU using a sales invoice. The LGU will then send a cheque to settle the invoiced amount together with a disbursement voucher. Upon receiving the payment, the system will issue a collection receipt to the LGU, validating that the payment has been received. After a week of collecting payments in the form of cheques, FGT Electronics’ personnel will deposit these with their prepared deposit slip in the Bank, and in exchange, they will be given a validated deposit slip which will be recorded and filed in their system. RECOMMENDED REVENUE SYSTEM 19

Level 0 Diagram FGT Electronics' recommended Revenue System begins with the external entity, LGU, whose inputs initiate the system consisting of nine processes: Receive Project Confirmation, Create Sales Order, Arrange Project Delivery, Schedule Delivery Date, Deliver Scheduled Service, Process Client Payment, Update Accounting Records, Prepare Deposit Slip, and File Deposit Slip. Likewise, it is important to note that FGT acquires projects through PHILGEPS, an online portal where the proposed projects by local government units or LGUs, national, and other government offices are posted. A bidding process is conducted, and if FGT wins the bid, the respective office provides them with the contract and other bidding documents, initiating the revenue system. RECOMMENDED REVENUE SYSTEM 20

Process 1: Receive Project Order The recommended revenue system will also begin with the Sales Department receiving the four documents: the contract, the notice of award, the notice to proceed, and the LGU's purchase request which are proof that the company won the bidding. These four documents are filed in a folder and from these, the purchase request details and the delivery period are extracted. Then, the purchase request details will be retrieved by the account that flows to create the sales order. Finally, the delivery period stated in the contract will also be sent to arrange the project. Process 2: Create Sales Order The purchase request details that are extracted from the purchase request given by the LGU will be used to create a sales order. The sales order will be filed in a folder and later be used for referencing purposes. Two copies of the sales order will be generated, one will be used to update the master file and the other copy is sent to the succeeding process. RECOMMENDED REVENUE SYSTEM 21

Process 3: Arrange Project Delivery Process 3.1: Create New Project The delivery period taken from the contract and the sales order copy 2 will be used by the account manager to create a new project. The project details and duration of the delivery are sent to the Technical department while the information regarding the required materials for the project will be used by the Sales department in the succeeding process. Process 3.2: Check Stock Availability Upon creating a new project, the list of materials required will be sent to the Sales Department, allowing them to check whether the materials needed in the project are available. Thus, a stock request will go to the inventory management system software to display the updated amount of stock in the warehouse. In case that the stocks are insufficient, the back-order file will be updated to reflect the request. However, if the stocks in the warehouse are sufficient, the availability of stocks is sent to the process of creating a job order. RECOMMENDED REVENUE SYSTEM 22

Process 3.3: Create Personnel Availability The project manager from the Technical department will check on the availability of personnel after receiving the details of the newly created project. The project manager will then send a personnel request to the personnel log to determine which technicians are available. A list of available technicians is created and received by the project manager who also handles the succeeding process. Process 3.4: Assign Service Personnel The project manager will assign technicians to deliver the goods or services using the available personnel list. The assigned personnel list is sent to the account manager of the Sales Department. Process 3.5: Create Job Order Upon confirming available stock in the warehouse and the assigned personnel to deliver the project, the account manager creates a job order sent to the technical department’s project manager. RECOMMENDED REVENUE SYSTEM 23

Process 4: Schedule Delivery Date The project manager will receive the job order to make a schedule in delivering the purchases of the client. The details of the schedule will be prepared and then sent to the assigned personnel who will deliver the goods that are being sold. In the event of incomplete deliveries, a back job will be sent to schedule another delivery date. RECOMMENDED REVENUE SYSTEM 24

Process 5: Deliver Scheduled Service Process 5.1: Deliver Project Requirements Upon receiving the schedule details, the Technical department will deliver the goods and services to the LGU according to the schedule. A delivery receipt in two copies will accompany the delivery. They will send the original copy to the LGU while the other copies are used in the next processes. RECOMMENDED REVENUE SYSTEM 25

Process 5.2: Update Delivery Progress After the delivery, the technical department will use the delivery receipt copy to update the delivery progress. If the delivery was incomplete, they would set up a new schedule to fulfill the back jobs. In cases that the project has already been fulfilled, the team will submit the delivery receipts to the Sales Department. Moreover, the report for the project accomplishment will be surrendered to the account manager. Process 5.3: Compile Delivery Receipts The Sales department will compile all the delivery receipts relating to the project. These receipts will be filed in the closed project file. The master file will also be updated with the date of completion of the project from the last delivery receipt. Process 5.4: Forward Delivery Documentation Reports regarding the accomplished project will be used by the account manager to forward the proof of delivery to the LGU. This includes photos that serve as extra documentation and proof of delivery. RECOMMENDED REVENUE SYSTEM 26

Process 6: Process Client Payment Process 6.1: Prepare Sales Invoice A copy of the delivery receipt and sales order will be used to prepare the sales invoice. The sales department will verify if the amounts indicated on the sales order and delivery receipt are equal. After which, 3 copies of the sales invoice are produced. The original copy of the sales invoice is sent to the LGU. A copy of the sales receipt will be used to establish accounts receivable. The details of the sale transaction will be recorded in the sales journal. The preparation of a sales invoice also produces the billed amount, which will be used in the following process: collecting from the client. RECOMMENDED REVENUE SYSTEM 27

Process 6.2: Establish Accounts Receivable In this process, the sales invoice is used to establish receivables from the LGU, wherein the total amount due is recorded in the AR subsidiary ledger. Process 6.3: Update Inventory Records Using the reviewed stock release from the preparation of the sales invoice, the adjustment in inventory is recorded in the general journal. Process 6.4: Collect Client Payment The billed amount is used to prepare 2 copies of the collection receipt. The original collection receipt is sent to the LGU while the copy is used in the subsequent process. Once the LGU receives the collection receipt, the LGU will release a disbursement voucher along with the cheque. After the collection, the cheque number and date collected are recorded in the master file, while the validated check will be utilized in the subsequent process. RECOMMENDED REVENUE SYSTEM 28

Process 7: Update Accounting Records Process 7.1: Reconcile Collected Checks Before depositing all the collected cheques and updating the accounting records, the validated cheque will be first reconciled with the cheque numbers saved in the master file to ensure no missing cheques. Process 7.2: Update Accounts Receivable After the cheque reconciliation, it will now be used together with the collection receipt copy to update the accounts receivable records. In addition, the total collected amount stated in the collection receipt will be used in the Accounts Receivable subsidiary ledger to post the payment received and in the cash receipts journal to close the Accounts Receivable. Process 7.3: Update General Ledger The accountant receives the Accounts Receivable summary report prepared by the bookkeeper and posts it to the Accounts Receivable control account. RECOMMENDED REVENUE SYSTEM 29

Process 8: Prepare Deposit Slip The collected amount from the previous process will be used to prepare the deposit slip. The personnel who will perform the deposit will record the custodian’s names and deposit dates in the in/out log. This measure will serve as a control for the entity in case of untoward incidents and accountability. After recording in the log, the designated personnel will now go to the bank with the company driver and deposit the cheques along with their prepared deposit slip. Process 9: File Deposit Slip The bank will release a validated deposit slip, which will be sent for filing in the deposit slip file. RECOMMENDED REVENUE SYSTEM 30

DIFFERENCES WITH THE CURRENT SYSTEM AND RATIONALE DIFFERENCES WITH THE CURRENT SYSTEM AND RATIONALE 31